State of the Industry (2018): British Columbia Tree Planting

I believe that the reforestation industry in BC, and particularly the tree-planting side of the industry, is currently approaching an important historical point.  I'd be hesitant to call it a crossroads, but I'm not sure what I actually could call it.  Let me try to explain.

Tree planters are almost always paid on a piece-rate basis, ie. varying rates per tree planted.  The more trees they plant, the more money they earn.  Unfortunately, the industry has been under severe pricing pressure over the past decade.  Right now, in a lot of segments of the industry, especially in northern BC and Alberta, prices are equal to or lower than they were in 2006/2007.  That's a terrible situation, since inflation has eroded our purchasing power over the years.

According to one website that I looked at, inflation from 2006 to 2018 (measured by the CPI) has increased by approximately 21.85% overall.  This means that if earnings have remained stagnant during the same period, the "value" of the money that planters have earned has decreased by more than 20% during these twelve years.  Interestingly, according to another website I looked at, average wages in Canada (across all industries) have increased by approximately 24% during the same time period.  That data was based on all industries nationally, and is supported by minimum wage increases in all provinces during that time period.

I'm not sure if my understanding about why this has happened is completely valid, but I can think of some possible or probable reasons:

- The economic downturn of late 2007 and 2008 (the Great Recession) did tremendous damage to the planting industry.  Prices in the 2007 season, when viewed in a historical context, were great.  But then, in many areas, prices dropped by 15-30% from 2007 to 2009.  There was a slight recovery (in my personal experience) starting in 2011, but never to the previous levels.

- If I remember correctly, I believe that industry volumes dropped from 2006 to 2007, immediately before the Great Recession.  This meant that industry participants were chasing lower volumes.

- There was an oversupply of labour at the time, and too many companies were competing for a limited volume of work (many companies had expanded their operations from 2003-2007).

All of the above is my personal understanding of the state of the industry at that time, but there is probably a lot more to the picture than what I've explained.  As I mentioned, my understanding may not be 100% accurate.


Let's look ahead now.  For planters, I believe that there is a "perfect storm" coming.  Here are some reasons:

1.  Less and less people are interested in pursuing summer jobs as tree planters.  Do I have any hard empirical evidence of this?  No.  However, I do have anecdotal evidence.  The number of job applications that were received in 2018 by a number of owners/senior management at various planting companies dropped to about one third of 2017 levels.  This is a staggering decline, and it is noteworthy that it seemed to happen at several large companies.

2.  The attrition rates during the 2018 season seemed to be high for the industry as a whole.  Now to be honest, the attrition rate in my own camp (the only area where I am 100% confident about the data I'm examining) was low, which contradicts this point.  However, I heard rumours from a large number of planters about high dropout rates at many large planting companies.  We also saw a very significant number of mid-season and late-season "still hiring" ads on Facebook and other forms of social media, which would seem to confirm either that attrition rates during the season WERE high, OR that companies went into the season understaffed.

3.  The industry is projected to need to plant a "historically strong" number of trees again in 2019, and then in 2020, even greater volumes (record-breaking numbers).  Some of this is due to the record-breaking wildfire year in 2017, and it's pretty obvious that this year's wildfires (which eclipsed even 2017 damage) will make things even worse.

Source:  https://wfca.ca/2018/06/western-forestry-contractors-association-rumour-mill-roundupdate-volume-18-issue-08/


In general economic terms, when labour is in diminishing supply, and demand for that labour is increasing, prices need to increase in order to address the situation.  However, the big question is this:  Will contractors (planting companies) recognize and accept this?  Or is the industry too short-sighted and competitive to allow worker prices to rise?

Complicating the issue is the fact that companies are facing increasing costs in many areas, not just in their labour expense.  For example:

- Fuel prices are significantly higher now than they were up to 2006 (with the exception of post-Katrina fuel pricing surges).  In fact, in the past twelve months alone, average fuel prices have increased by over 20%.  Vehicles and transportation costs are the second-largest expense for planting companies, after labour.

- WorkSafe contribution costs have gone up significantly over the past decade.  Even companies with good individual ratings/discounts are affected initially by the industry-wide rate.

- There is a new Employer Health Tax in BC which is scheduled to come into effect on January 1st, 2019.  This will increase payroll costs, even though it is the companies rather than the employees that will be paying this to the BC government.

- The price of most goods and services (pretty much everything else that planting companies have to spend money on, ie. everything from costs of flagging tape to mechanics' labour rates to truck rentals, etc.) has gone up 20% or more in the past decade.

- Although tuition is not something that every planter needs to budget for, and tuition increases may not be as noticeable for long term planters who only go to school for a handful of years during their planting career, the fact remains that tuition fees have increased very significantly over the past decade (fee increases averaged forty percent from 2006 to 2016).

- And most importantly, minimum wage rates are rising across Canada.  Rapidly.  When minimum wage was under $10/hr, the "differential" between minimum wage and making say $17/hr in a planting camp was enough to convince some people that the hardships of planting were worth the extra earnings.  If minimum wage is $15/hr, why would someone want to make only $2/hr more as a planter, when they could instead work a much less demanding job in the city?  Note:  That $17/hr is a random number, but it has some validity, as a survey by the WFCA a year or two ago seemed to indicate that respondents earned approximately that much, industry wide.  And incidentally, that's a terrible hourly wage for the work required, and considering the fact that planting slowly tears your body apart.

On the note of minimum wage, Ontario's minimum wage increased to $14.00/hr in 2018, and increases to $15.00/hr in 2019.  The jump in early 2018 was a huge jump from 2017 levels (which had been $11.40/hr).  Normally, BC planting companies hire a large number of people from Ontario, and I believe that the increases to minimum wage in Ontario are part of the reason why so many companies have been quietly talking about the huge drop in applications this past season.


I look at the current situation as being akin to a frog in a boiling pot of water.  If you were to put a frog into a boiling pot of water, it would try to escape immediately (not that I would do this to a frog).  However, if you put that same frog in a pot of water that is at a normal temperature, and then increase the temperature slowly, the frog doesn't realize that it's slowly getting boiled alive.  It doesn't realize the danger that it's in.  Planters (and planting companies) have been suffering more and more with each passing year, and unfortunately, nobody has been bold enough to scream "enough is enough!"


My hope is that this year, ALL planting contractors realize that there is more work available in 2019 than can be done with the existing labour supply, and they can and should bid higher on all contracts.  Much higher.  If they don't happen to win a particular contract, who cares?  There is almost certainly more work than the industry can handle, and if contractors are patient, work will eventually come to them at favorable prices.


How much do prices need to rise right now?  In my opinion, almost twenty percent.  Will that happen?  Probably not, but it could happen if contractors are disciplined during the upcoming viewing/bidding season (which runs over the next two months).


To be clear, even if bid prices did rise by 20% this fall, planters would still not see that same increase in their wages.  Companies need to be able to cover their increased WorkSafe premiums and EHT taxes and everything else, and if they don't, they'll go out of business.  But it's safe to say that at least part of the bid price increases can be [and need to be] passed along to planters.  Without adequate workforces, companies will fail.  I've already heard of numerous examples of inability to complete projects in 2018.  I've even been to a landfill that was literally green with tree bundles, where one planting company (whom I will leave unnamed) was unable to finish a project and the forester had to pull the plug and destroy hundreds of thousands of seedlings.  This was not a unique situation.  And the problem may be much worse next year, unless there is a greater financial incentive for people to accept planting jobs, and less reason for them to quit part-way through the season.

I talked to about a dozen forest nurseries this year, and the consistent story was that 98% of contractors were delaying tree deliveries, because they didn't have the workforce to complete their work according to projected timelines.  Most companies blamed the late snow melt for this problem, but the truth is that the melt was only part of the problem, and simply a convenient excuse for some companies.  If any foresters don't believe me, try calling several nurseries for verification.

In addition to increasing planter prices, higher bid prices could be used by companies to "do things right."  Many contractors, large or small, are cutting corners in various ways.  Some of these are minor penny-pinching, but in other cases, contractors are blatantly contravening various government regulations and employment standards.  Just think, if you're a large contractor that is NOT currently paying minimum wage top-up properly to your new workers, higher bid prices this year could offer you an opportunity to fix that deficiency.  There are certain benefits to compliance, other than no longer having to hope that your rookies don't file employment standards complaints against you.

To be more explicit, let me tell you something that some of you may not realize.  Companies in BC are required to top workers up to minimum wage, if they don't earn the equivalent of minimum wage through their piece-rate earnings.  Even though paying minimum wage top-up properly can be quite costly for a company, it should be thought of as an investment in your people, not as an expense.

My own camp has paid a tremendous amount of top-up some years, often exceeding $20,000 in a single season.  And do you know what?  I've also had only four first-year planters quit out of the 52 that I've hired over the past four seasons (2015-2018 inclusive).  So for any of you discount contractors out there that had problems finishing contracts this year because lots of people quit, you should think carefully about this.  Would you rather pay $20,000 to $30,000 in top-up in May, or lose out on much more than that because you were defeated in August and weren't able to complete work that you had committed to?  My thirteen first-year planters this season planted an average of 94,818 trees apiece, for a total of 1.23m trees (out of the 6.50m trees that my full camp planted during the regular season).  And every one of them got paid some top-up at the start of the season, sometimes significant amounts.  Yet without them, our camp wouldn't have been able to accept and plant the extra three-quarters of a million trees that were offered to us by other contractors who were behind schedule.  The minimum wage top-up subsidization, when paid properly and legally, allows a company to slash attrition rates of first-year planters to a fraction of what the dropout rate would be without top-ups.  But some BC planting contractors continue to break that rule to this day, because "the bid prices are too low to be able to afford to pay top-up."  Part of the reason for the low attrition rates and high production of my first-year planters is also attributable to the training regimen that I put them through, based on the information in Step By Step.


I should clarify that there is some variation between geographic regions throughout BC.  My understanding is that the small companies in the southern Interior, and some of the coastal companies, were not hit as hard by the Great Recession as the larger companies operating north of Merritt and Kamloops.  Also, in some cases, smaller companies have been somewhat insulated from bids where "the lowest price was the law" by virtue of their skilled workforces, and by working for foresters who understood the value of good workmanship.  Of course, when you pay and treat your workers well, your year-to-year retention levels are much higher, and your company benefits.


The funny thing about this whole situation is the question of who ultimately gets hurt if prices don't go up significantly.  Is it the planters?  Nope.  They'll just quit and move on to other jobs/careers/vocations.  The majority of the tree planting workforce is only in the industry for 1-4 years, then they move on to a new chapter in their life.  The people who are always left behind to deal with the long-term financial pressures are the company owners.  The owners are the ones who are ultimately going to be hurt the most if the industry situation doesn't change.  And they are the only ones who can effect a change, by exercising discipline when putting bids together this year.

For a lot of company owners, their entire life has been invested into their company.  I mean this on many levels, including their time, financial, and emotional commitments.  Blood, sweat, and tears.  Many of these owners are in a position where they are hoping to sell or retire within the next five years.  But who will want to buy a planting company if the planting industry can't recruit workers, or if the company is losing money?  For many of these owners, their company IS their retirement nest egg, and this becomes a do-or-die financial situation.  Even if planters don't understand or don't care about the long-term financial health of the planting industry, the owners must.

Some of the blame for current pricing levels can probably be blamed upon full-time upper-level management at the large companies, rather than upon the owners.  If there isn't enough work, they may lose their jobs.  Some of the people in these positions realize that their company needs a certain amount of work to be able to keep them on the payroll.  They may pull the wool over the eyes of owners on some bids.  Shame, shame.

Today's workforce is very different from the workforce of a decade ago.  They are connected.  There has never been as much shared information between planters of different companies as there is today, thanks to social media.  Information is empowerment.  All BC government bids are public information, paid for by the taxpayers.  This information gets published and shared widely (not just on BC Bid and Replant.ca).  Any individual companies that bid low on 2019 contracts will be judged in the court of public opinion, and the information will be re-shared on social media during the spring recruitment season.


Some people believe that there is a dichotomy between tree planters and company owners.  They believe that when one side gains, the other side necessarily loses.  I don't believe that this is the case.  I believe that this is a very symbiotic industry.  When planters do well, it is good for the companies they work for.


So I'll end this post with a message to any company owners who are reading this: It's time for you to stop "sharpening the pencils" and trying to cut corners on bid prices.  It's time for you to think about the long-term health of your work force, and the long-term financial health of your company.  Both of these things can improve in tandem if everyone exercises discipline while bidding this year.  You need to submit bids for what the jobs should truly be valued at, not for the lowest amount you can suffer through.  The ball is in your court...


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If you'd like to see results of public tree planting bids for 2019 contracts in BC, here's a link:
www.replant.ca/publicbids


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Late edit:  There are a few subjects that I didn't really cover in this post, which I should have talked about:

- Nursery Capacity:  The western Canadian forest nurseries have the capacity to increase production slightly for 2020, and they already had a bit of spare capacity for 2018.  But is it enough to meet demand?

- Direct Award Contracts:  If low-bid contracts do happen to increase in value this fall, AND the industry has more work than it can easily handle, then which contracts will be dropped?  There's a good chance that low-priced direct award work will be the first to dropped, as planting contractors no longer need the security blanket of guaranteed work.  Some foresters at private mills may need to prepare themselves for requests for pricing adjustments.  Some contractors may soon be in a position to be able to walk away from low-margin work.